Karnataka HC Directs Authorities to Not Grant Permission for Construction Near Protected Monuments  ||  Delhi HC Sets Aside Ruling to the Extent of Restraining Indiamart to Provide ‘PUMA’ Search Option  ||  HP HC Grants Bail to NDPS Accused Citing Delay in Initiating Trial Proceedings  ||  Madras HC: Certification of an Entire Film Cannot be Denied Without Specifying the Objections  ||  J&K HC: Mere Registration of Criminal Case Doesn’t Constitute ‘Criminal Proc.’ for Impounding Passpor  ||  SC Refuses to Entertain Urgent Hearing of Plea Against Felling 875 Trees in HP  ||  SC Refuses to Stop Incineration of Toxic Chemical Waste from Bhopal Gas Tragedy  ||  SC Declines to Interfere with HC’s Order to Decide Schedule for Tiruchendur Temple Consecration  ||  Delhi High Court Grants Interim Relief to Mokobara in Trademark Case  ||  Delhi HC: Students Shouldn’t be Excluded from Admission because of Untimely Declaration of Results    

CBDT proposes changes to Rule 11UA of Income Tax Rules, 1962 - (19 May 2023)

Direct Taxation

An amendment has been introduced to bring the consideration received from non-residents for issue of shares within the ambit of Section 56(2)(viib) of the Income-tax Act, 1961 in the Finance Act, 2023. It provides that, if consideration for issue of shares exceeds the Fair Market Value (FMV) of the shares, it shall be chargeable to income-tax under the head ‘Income from other sources’. Subsequent to this amendment, detailed interactions have been held with stakeholders. Based on the inputs, Rule 11UA for valuation of shares for the purposes of section 56(2)(viib) of the Act is proposed to be modified.

Proposed changes in Rule 11 UA :

a. Rule 11UA currently prescribes two valuation methods with respect to valuation of shares namely, Discounted Cash Flow (DCF) and Net Asset Value (NAV) method for resident investors. It is proposed to include 5 more valuation methods, available for non-resident investors, in addition to the DCF and NAV methods of valuation.

b. Further, where any consideration is received by a company for issue of shares , from any non-resident entity notified by the Central Govt , the price of the equity shares corresponding to such consideration may be taken as the FMV of the equity shares for resident and non-resident investors subject to the following:

i. To the extent the consideration from such FMV does not exceed the aggregate consideration that is received from the notified entity and

ii. The consideration has been received by the company from the notified entity within a period of ninety days of the date of issue of shares which are the subject matter of valuation.

On similar lines, price matching for resident and non-resident investors would be available with reference to investment by Venture Capital Funds or Specified Funds.

c. It is proposed that the valuation report by the Merchant Banker for the purposes of this rule would be acceptable, if it is of a date not more than ninety days prior to the date of issue of shares which are subject matter of valuation.

d. Further, to account for forex fluctuations, bidding processes and variations in other economic indicators, etc. which may affect the valuation of the unquoted equity shares during multiple rounds of investment, it is proposed to provide a safe harbor of 10 % variation in value.

Tags : CHANGES   RULE   PROPOSAL  

Share :        

Disclaimer | Copyright 2025 - All Rights Reserved